Wide Sell-Off on Grim Retail News; Commodity Prices Also Go Lower

By JACK HEALY

Published: November 12, 2008

Shares on Wall Street skidded on Tuesday in a fitful day of trading amid signals that the economic downturn was lashing well-known American brands from Liz Claiborne to Starbucks to T. J. Maxx.

Not even a short-lived 268-point rally could pull the Dow out of its doldrums. After languishing deep in negative territory, financial markets climbed sharply late in the day. But the run stalled out, and markets pulled back to close at two-week lows.

The Dow Jones industrial average, which was down 300 points at midday, fell 176.58 points, or 2 percent, to 8,693.96. The technology-heavy Nasdaq composite fell 35.84 points, or 2.2 percent, to 1,580.90, and the broader Standard & Poor's 500-stock index was down 20.26 points, also 2.2 percent, at 898.95.

The broad sell-off raked across the spectrum, hammering companies as diverse as General Motors, Delta Airlines, Nordstrom and Microsoft, all of which ended lower.

''Volatility still remains in these markets,'' said Ryan Larson, head equity trader at Voyageur Asset Management. ''We've still got a lot of fears out there, still a lot of headwinds. There are a lot of questions regarding when enough is enough.''

There was no end in sight on Tuesday, analysts said, only more signs of weak corporate earnings, economic contraction and reduced consumer spending.

The gloomy mood was driven by falling profits at retailers like the coffee chain Starbucks and the discount clothing chain TJX Companies, which owns T. J. Maxx and Marshall's department stores. Adding to the woes was the bankruptcy filing of the electronics retailer Circuit City Stores.

On the housing front, government-controlled mortgage giants Fannie Mae and Freddie Mac announced a program to stem the tide of home foreclosures while a major home builder reported sobering revenue.

Shares in Toll Brothers, the builder of luxury homes, fell slightly after the company reported a sharp decline in sales through the end of October. Toll's revenue from home building in the last three months fell 41 percent, to $691 million, from $1.17 billion over the same period in 2007.

About 30 percent of Toll's contracts from the current quarter have canceled. In a statement accompanying the numbers, the chief executive, Robert I. Toll, made a plea for more government intervention in the housing market.

''We urge Congress to stimulate demand by reducing mortgage rates and fees and by providing incentives such as a buyer tax credit for the purchase of all types of homes,'' he said in a statement. ''We believe these initiatives would offer the greatest benefit for the taxpayer's dollar.''

Shares in Starbucks also declined, falling 2 percent, after the coffee chain reported Monday that its net income had fallen 97 percent as it closed down 600 stores and laid off 1,000 employees as part of a reorganization.

G.M. had another rough day; its stock slipped below $3, to $2.92 a share, its lowest price in decades. On Monday, as politicians discussed a federal bailout for the American auto industry, an analyst downgraded G.M. shares to sell and set the company's target stock price at $0. Shares in automakers including Toyota, the Ford Motor Company and Honda also slid. ''Everyone agrees that we're in a recession, so the markets have priced that in,'' said Douglas M. Peta, an independent market strategist. ''But I don't think they've priced in what appears to be an increasingly sharp and increasingly protracted recession.''

Shrinking portfolios, slumping earnings and corporate cutbacks have hobbled consumer spending and employment numbers, and those symptoms of a slowdown are washing back onto the markets.

''All of these measures taken together suggest that the slowing is worse than investors had expected, and that it is occurring very, very abruptly,'' Mr. Peta said.

The slowdown continued to weigh on energy prices.

Crude oil prices in New York dipped below $60, settling at $59.33 a barrel, down $3.08 for the day. As oil prices dwindled on worries of falling demand, shares in energy companies like Exxon Mobil, Chevron and Royal Dutch Shell declined. The Hess Corporation was down 9.1 percent.

Prices for commodities like gold, sugar, coffee and cattle slid on Tuesday as traders worried that a worldwide slowdown would suppress demand. The falloff in raw-materials prices is hurting developing countries with economies built on exports, and on Tuesday, the World Bank trimmed its growth forecast for developing economies to 4.5 percent, from 6.4 percent.

''I don't think that anyone is trying to ascribe rational valuation to anything right now,'' Mark Mathias, chief executive of Quantum Asset Management, said of the commodities sell-off. ''They're just selling it because they can sell it.''

The bond markets were closed for Veterans Day.

PHOTO: Traders at the New York Stock Exchange Tuesday. The stock markets declined as signs continued of weakened corporate profits, economic contraction and a pullback in consumer spending.(PHOTOGRAPH BY RICHARD DREW/ASSOCIATED PRESS)
CHART: The Dow minute-by-minute: Position of the Dow Jones industrial average at 1-minute intervals yesterday.(Sources: Associated Press; Bloomberg) Chart details line graph.